Minority Entrepreneurs — Continuous Success with Angel Investors!

Blogged By:

Patricia Tomczyszyn, Minority Business Development Agency

Created on January 23, 2013

Minority-owned businesses are the fastest growing business sector in the Nation, in terms of gross receipts and paid employees.[1] Yet, access to capital remains the biggest obstacle limiting their establishment, expansion and growth. While traditional funding remains the most sought after source of capital, alternative funding sources, such as angel investors, have proven successful for minority entrepreneurs.

Minorities represent on average less than 7% of all entrepreneurs seeking funding from angel investors. However, they succeed in acquiring angel funding as often as their non-minority counterparts. From January 2009 to June 2012, 17% of all entrepreneurs seeking angel investor funding succeeded. The yield rate for minority entrepreneurs during that same period was 16.1%, a negligible difference. The yield rate is the percentage of investment opportunities that are brought to the attention of investors that result in an investment. In 2010, the yield rate for minority firms was 19% compared to the overall rate of 18.4.[2]

I do not know why minorities do not present their ideas to angel investors more frequently, but simple math tells us that angel investor funding is a largely overlooked funding opportunity. Angel investments are estimated at $225 billion for 2011. Those funds financed over 66,000 ventures — an increase of 7.3% over 2010. Software was the top industry sector with 23% of total angel investments in 2011, followed by Healthcare Services/Medical Devices and Equipment (19%), Industrial/Energy (13%), Biotech (13%), IT Services (7%) and Media (5%).[3]

According to Jeffrey Sohl, Director of the Center for Venture Research, in his 2011 report, “Minority angels accounted for 4% of the angel population and minority-owned firms represented 7% of the entrepreneurs who presented their business concepts to angels … however, the small percentage of minority-owned firms seeking angel capital is of concern.”[4]

The Minority Business Development Agency and our national network of more than 40 MBDA Business Centers is here to help. Contact an MBDA Business Center[1] to secure the right kind of financing for your business, like we did for Mountain Air Helicopters[2].

[1] U.S. Census Bureau, 2007 Survey of Business Owners, released June 2010.